Income Tax Ordinance, 2001 — Section 161: Failure to pay tax collected or deducted

161. Failure to pay tax collected or deducted.— (1) Where a person–

(a)fails to collect tax as required under Division II of this Part 3[or Chapter XII] or deduct tax from a payment as required under Division III of this Part 4[or Chapter XII] 5[or as required under section 50 of the repealed Ordinance]; or

(b)having collected tax under Division II of this Part 6[or Chapter XII] or deducted tax under Division III of this Part 7[or Chapter XII] fails to pay the tax to the Commissioner as required under section 160, 8[or having collected tax under section 50 of the repealed Ordinance pay to the credit of the Federal Government as required under sub-section (8) of section 50 of the repealed Ordinance,] the person shall be personally liable to pay the amount of tax to the Commissioner 9[who may 10[pass an order to that effect and] proceed to recover the same.] 11[(1A) No recovery under sub-section (1) shall be made unless the person referred to in sub-section (1) has been provided with an opportunity of being heard. 1 Inserted by the Finance Act, 2015 2 Inserted by the Finance Act, 2002. 3 Inserted by the Finance Act, 2003. 4 Inserted by the Finance Act, 2002. 5 Inserted by the Finance Act, 2003. Earlier this was inserted by S.R.O. 633(I)/2002, dated 14.09.2002 which stands rescinded by SRO 608(I)/2003, dated 24.06.2003 with effect from 01.07.2003. 6 Inserted by the Finance Act, 2003. 7 Inserted by the Finance Act, 2002. 8 Inserted by the Finance Act, 2003. Earlier this was inserted by S.R.O. 633(I)/2002, dated 14.09.2002 which stands rescinded by SRO 608(I)/2003, dated 24.06.2003 with effect from 01.07.2003. 9 Inserted by the Finance Act, 2002. 10 Inserted by the Finance Act, 2003. 11 New sub-sections “(1A) & (1B)” inserted by the Finance Act, 2002. 337 Chapter X – Procedure (1B) Where at the time of recovery of tax under sub-section (1) it is established that the tax that was to be deducted from the payment made to a person or collected from a person has meanwhile been paid by that person, no recovery shall be made from the person who had failed to collect or deduct the tax but the said person shall be liable to pay 1[default surcharge]at the rate of 2[twelve”]per cent per annum from the date he failed to collect or deduct the tax to the date the tax was paid.]

(2)A person personally liable for an amount of tax under sub-section (1) as a result of failing to collect or deduct the tax shall be entitled to recover the tax from the person from whom the tax should have been collected or deducted. 3[(3) The Commissioner may, after making, or causing to be made, such enquiries as he deems necessary, amend or further amend an order of recovery under sub-section (1), if he considers that the order is erroneous in so far it is prejudicial to the interest of revenue: Provided that the order recovery shall not be amended, unless the person referred to in sub-section (1) has been provided an opportunity of being heard.] 162. Recovery of tax from the person from whom tax was not collected or deducted.— (1) Where a person fails to collect tax as required under Division II of this Part 4[or Chapter XII] or deduct tax from a payment as required under Division III of this Part 5[or Chapter XII,] the Commissioner may 6[pass an order to that effect and] recover the amount not collected or deducted from the person from whom the tax should have been collected or to whom the payment was made.

(2)The recovery of tax under sub-section (1) does not absolve the person who failed to deduct tax as required under Division III of this Part 7[or Chapter XII] from any other legal action in relation to the failure, or from a charge of 8[default surcharge] or the disallowance of a deduction for the expense to which the failure relates, as provided for under this Ordinance. 1 The words “additional tax” substituted by the Finance Act, 2010. 2 The word “eighteen” substituted by Finance Act, 2015. 3 New sub-section (3) added through Finance Act, 2019. 4 Inserted by the Finance Act, 2003. 5 Inserted by the Finance Act, 2002. 6 Inserted by the Finance Act, 2003. 7 Inserted by the Finance Act, 2002. 8The words “additional tax” substituted by the Finance Act, 2010. The substituted provision has been made effective from 05.06.2010 by sub-clause (77) of clause 8 of the Finance Act, 2010. Earlier the substitution was made through Finance (Amendment) Ordinance, 2009 which was re-promulgated as Finance (Amendment) Ordinance, 2010 and remained effective till 05.06.2010. 338 Chapter X – Procedure